When we set up a protective put, do we want buy an ATM put or OTM put?
I just solved a mock and they used ATM, but I don’t get why?
It depends on how much protection you want and how much you’re willing (and able) to pay for it.
You could buy ITM puts if you want to.
On the real exam they’ll make it clear how much protection you want; e.g., a price drop of no more than 5%.